Manulife One program - Is this a good idea?

[ExtraSlow]

My wife and I have been looking at changing banks and possibly refinancing our mortgage recently, and the ManuLife One commercials have caught our eye.
I went online and did some rough calculations, and they are claiming that they could save us over a hundred thousand dollars and have our house paid off 18 years sooner than with the traditional approach. Needless to say, that is pretty appealing.

I have a basic understanding of this program, and it all sounds good, but I was wondering if there are some downsides that they don't advertise.

The web site: http://www2.manulifeone.ca/en/aboutmanulifeone/

I know there are a lot of financially savvy folks on here and I'd love to hear thier thoughts.

[Redlyne_mr2]

My mom is a broker for them.. you need to have a decent amount of cashflow and or equity and also be good with your money.

[Heff]

It can work wonders on your ETA to "Mortgage Burning Party" if you're responsible with money.

If you like to spend money a lot and are impulsive shoppers, prolly not the best way to go.

[Masked Bandit]

I think CTFS has a similar program.

I ran through the calculator program and the results are....well...almost too good to be true. I understand how it works but I'm getting the "if it's too good to be true, it probably is" feeling.

If you aren't disciplined with your finances I think one could end up in a lot of trouble with this product.

[ExtraSlow]

Well, both my wife and I are pretty good with our money, and we are currently cramming a pretty hefty chunk into ING every paycheque. We are much better savers than spenders.

I think the Manulife calculator assumes that all of your savings are held in regular low interest savings accounts, so if you are in ING or anything that does generate decent interest, it's probably overstaing the benefit. I save for home repairs, vacations and new cars in ING, so at any one time, the amount in there is pretty substantial, at least to me.

Hmmm.

[BrknFngrs]

It seems like a more formal approach for what some people choose to do with a HELOC. Your mortgage is basically sitting in a revolving credit account and any money you bring in reduces the balance, any money you spend increase the balance. As long as you watch your money carefully, you're ok with always having a negative account balance, the rate is reasonable and you can handle any fluctuations (I'm assuming its a floating rate) it's probably a pretty good option.

[Kritafo]

We did manulife for about 8 years and took off large chunks out of our mortgage that is for sure. We only changed when they dicked us around on a money order that took 10 x's longer than it should have. Plus depositing an actual check is a pain in the rear.

[malbadon]

There are better ways to pay down your mortgage, if you are aggressive about it, than M1, but god is it simple if you have the right combo of laziness and frugality. For 3 years we made the minimum payments on our standard open mortgage. That amounted to about 21k principal paid down.
But we knew we should have had lots of extra money, I mean, we made way more than we spent. But there was never extra money around when it came time to top up, never got around to setting up a "set aside fund", etc, etc, everyone knows the excuses.

Its a fundamental shift when you are on M1, that massive negative account balance stares you smack in the face every time you go to the bank machine, it accosts you, it insults you, its...glorious. You don't have a bank account with $1200 bucks in it anymore, you have a bank account with NEGATIVE $150,000 or whatever, your debt is your bank account. Still want to take out that $20 for that random stupid item you don't really need?
In the 2 years we've been on M1 we've paid down 46k. We knew we had the extra money, but it took M1 to sit us down and actually put that money to something productive.

I balance the fact I'm paying a bit more in interest rate than what I could get with an open, with the knowledge that in the 3 years in an open I could never be bothered to make a single extra payment.

Notes 1:
Priced at prime, not "prime minus ##" like you'd get with an open, but straight out prime, and calculated daily. If you are only going to pay the same amount you would have plopped onto your regular mortgage, this ain't for you.

Note 2:
You can go and buy a Porsche, with cash, tomorrow. If that just peaked your interest, M1 is not for you. M1 is like a big huge line of credit based on the amount the account is worth (value of house) minus what you owe. It should have made you happy that xxx much of your debt was paid off, not made you consider a sports car.

Note 3:
They don't do EMT, so you'll need an account elsewhere that does it. You can withdraw $$ without charge from HSBC's and Canadian Tire bank machines.

Note 4:
You are going to be able to pay off your credit card bill every month. If that just means you are going to go and max the damn thing out again, run like hell from M1.

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But if you know you have an extra 600, 1200, whatever, extra bucks a month kicking around that you usually blow on cheesy-poofs and ding-dongs, and are willing to stop spending it on cheesy-poofs and ding-dongs so you can get your mortgage over and done with, and have proven yourself to be to lazy to do any of the better ways of paying down your mortgage (an open mortgage, with a set aside high interest account that you pile extra money into and then make your once a year top-up from, is better).

[blownz]

^ very good post.

Most banks have something similar to this if you ask. Only problem is it can get you into trouble just like any credit card or loc can only this can be even worse.

If your goal is to pay down your debt as fast as possible and you are disciplined these types of accounts can be very good.

[Kritafo]

We always kept our PC account at the same time, I mean PC checks are free, M1's are not. We did a monthly money transfer for living expenses to our PC account and left everything else in the M1 account. It worked out great in the time we had it...no thinking involved.

[Masked Bandit]

Originally posted by malbadon

Its a fundamental shift when you are on M1, that massive negative account balance stares you smack in the face every time you go to the bank machine, it accosts you, it insults you, its...glorious. You don't have a bank account with $1200 bucks in it anymore, you have a bank account with NEGATIVE $150,000 or whatever, your debt is your bank account. Still want to take out that $20 for that random stupid item you don't really need?


--


I think this is probably the biggest advantage of this type of product. You always run faster when something is chasing you!

[Heff]

Originally posted by malbadon

Its a fundamental shift when you are on M1, that massive negative account balance stares you smack in the face every time you go to the bank machine, it accosts you, it insults you, its...glorious. You don't have a bank account with $1200 bucks in it anymore, you have a bank account with NEGATIVE $150,000 or whatever, your debt is your bank account. Still want to take out that $20 for that random stupid item you don't really need?
In the 2 years we've been on M1 we've paid down 46k. We knew we had the extra money, but it took M1 to sit us down and actually put that money to something productive.



We have something similar from the Bank that my Wife works at. We have a HELOC into which all of our salaries are direct deposited.

Every dollar that we don't spend on cheesy-poofs and ding-dongs goes toward our principal amount, allowing us to be finished with the debt that much faster.

Its a lazy, laissez-faire approach to that maxing out principal on a mortgage payment.

One thing that should be considered also, is that it is not necessary to take out the full value of your home in your HELOC. If you have equity and only take out that amount remaining in your home, you limit your ability to be extravagant until you build more equity.

On a cautionary note, however, you should be disciplined enough not to spend out all your equity whenever you get some.

That's the key to success with this sort of house-lending.